UPDATE 1-U.S. oil drillers cut rigs for first week since June -Baker Hughes

Reuters Staff

3 Min Read

(Adds Bakken rig count)
Oct 28 (Reuters) - U.S. oil drillers cut rigs this week for
the first time since June, ending a 17-week recovery in the rig
count, even as crude prices mostly held over $50 a barrel this
month, the key level analysts said should lead to more drilling.
Drillers cut 2 oil rigs in the week to Oct. 28, bringing the
total down to 441, compared with 578 rigs a year ago, energy
services firm Baker Hughes Inc said on Friday.
RIG-OL-USA-BHI
That ended the longest streak of not cutting oil rigs since
2011 started after crude briefly climbed over $50 a barrel in
May and June and held at that level for most of October. During
those 17 weeks, drillers added 113 rigs.
Despite the overall decline, drillers added five oil rigs in
the Bakken shale in North Dakota, the biggest weekly increase in
the region since August 2014, bringing the total there to 35,
the most since February.
The U.S. oil rig count plunged from a record 1,609 in
October 2014 to a six-year low of 316 in May after crude
collapsed from over $107 a barrel in June 2014 to near $26 in
February 2016 due to a global oil glut.
U.S. crude futures traded around $50 a barrel for
much of this week, but slipped below that level and were set to
decline for the first week in six on doubts about whether global
producers will agree on an output cut big enough to curb a glut
that has weighed on the market for two years.
But with oil prices still expected to rise in 2017 and 2018
with a projected tightening of the supply-demand balance,
analysts forecast energy firms will follow through on plans to
boost spending on new drilling in coming years.
Futures were trading near $52 a barrel for calendar 2017
and near $54 for calendar 2018.
Analysts at U.S. financial services firm Cowen & Co said
this week in a note that its capital expenditure tracking showed
nine exploration and production (E&P) companies, including Cabot
Oil and Gas Corp and Devon Energy Corp, planned
to increase spending by an average of 42 percent in 2017 over
2016.
Cowen said that forecast 2017 increase followed an estimated
43 percent decline in 2016 spending below 2015 levels for the 65
E&P companies it tracks.
Since most wells produce both oil and natural gas, Cowen
forecast increased spending in 2017 would boost average oil and
gas rig counts to 634 in 2017 and 732 in 2018 from 514 in 2016.
That compares with an average of 978 oil and gas rigs active
in 2015, according to Baker Hughes data.
(Reporting by Scott DiSavino; Editing by Meredith Mazzilli)